Super Bowl Advertiser Limit Break and Its Digi NFTs: A True Web3 Gaming Paradigm Shift

Written by Scarlett Wu & Bobo for Mint Ventures

Highlights

1. Investment Thesis

Why Free-to-Own is Better than Previous Narratives?

• Fully utilizes the blockchain to make game assets on-chain, making it easier to price and circulate, which is the foundation of trust and the core source of revenue for the transaction royalties.
• Creators actively make the way to obtain economic benefits long-term (using royalties instead of one-time sales), which ensures consistency between their own interests and those of players/communities in the business model. This makes it easier to gain users’ trust and long-term investment in the project, forming a truly cohesive and vibrant community.
• Through the pre-release and gradual operation of NFT game assets, it ensures that there is already an energetic and expectant community before the core game project goes online, reducing the risk of a cold start for traditional Free to Play games.

Sufficient Cash and Low Valuation

• Financing: Limit Break has announced $200 million in funding and is now cash-rich with plans for long-term construction, considering that the current ecological market value is only $40 million and traditional NFT communities haven’t discovered its value yet, the price belongs to the undervalued range.
• Royalties: After four months of release, DigiDaigaku Genesis collection alone has a transaction volume of nearly 20k ETH, which leads to more than 1,000 ETH in royalties as revenue.

Continuous Mechanism Innovation & Flexible and Rapid Execution Capability

• With the release of financing information and the narrative of (Free, Own). From the start, it sparked heated debate throughout the crypto community. In response to the royalty challenge, it attempted to promote the high integration of NFT and Web3 games from a technical perspective, allowing for greater imagination in new narratives.
• Seizing the BTC NFT hotspot may become the first official NFT blue chip to enter the BTC ecosystem.

Top Team, Equipped with Web2 / Web3 Experiences

• The core team is from Machine Zone, a veteran of Free to Play, specializing in deciphering whale players’ intentions. Game of War: Fire Age, a game they launched, had users spend five times the average annual amount paid by mobile game players, with some users spending millions on the game.
• The team has robust technology power and bandwidth, enabling seamless free mint experience following Super Bowl Ad. And the programmable royalty protocol is creative.
• Through the founder’s strong appeal and the high cohesion of the “cult-like community,” it has collaborated with multiple projects (Castaways, EtherOrc), ignited the communities of other games, and confirmed the user overflow of Digi community. Among the collaborative projects, Castaways is still popular and currently has 120,000+ monthly active users.

Digi Shall Fully Capture the Value of Limit Break’s Thrive

• The programmable royalty protocol to be implemented later may divide transaction royalties among existing Digi holders in the series.
• In the expected release game, there may be more value capture for the NFT design of the Digi series. In addition, Machine Zone’s games have no shortage of whale players who spend millions of dollars. For a game with tens of millions or even billions of users, 2022 Digi Genesis NFTs have an absolute rarity.

2. Main Risks

DigiDaigaku series NFTs mainly face two potential risks, one related to NFTs and the other to the games. Regarding NFTs, the complex ecosystem of the Digi series NFTs can easily discourage players unfamiliar with it. As for the games, there are three challenges: whether they can deliver high-quality games and achieve good user retention, whether the vast NFT system and the value capture of the project can be well connected, and whether the game products and content IP can appeal to young users’ aesthetics. For more information, please refer to “III. Business Analysis – Risks” section.

3. Valuation

Considering that the market value of the Digi series NFT is only about $40 million, and the valuation of the Limit Break primary market has not yet been announced, with a conservative estimate of 20% of the shares sold, it is worth $1 billion, and the financing amount alone is $200 million. With consecutive project development, sufficient cash flow and well-anticipated game design, the current market value of the DigiDaigaku series NFT has been assessed undervalued. Refer to “IV. Preliminary Valuation – Valuation” section for more details.